A Souk For Foreign Currency? 🏪

Welcome to the latest edition of ፍራንክ Digest!

Your weekly brief on all things Finance and Investing. Quick, enjoyable reads for busy professionals in 5 minutes or less.

What we’ve got in store for you:

• ⚡BUZZ: NBE Flirts With FX Liberalization

• 🏦 Specialized Banking?

• 🗝️ Key Takeaways

Thanks for reading!

BUZZ: NBE Doubles Down On FX Push With License Issuance

Banking

Do the names Dudga Fidelity, Yoga Forex, ring a bell?

No, those are not Metallic Rock band names. (Yes, band names can be wild!)

Actually, Dugda Fidelity Investment and Yoga Forex Bureau are two of the Independent Forex Exchange (FX) Bureaus that were granted license by the NBE to conduct buying and selling of cash notes of major convertible currencies.

In total, 5 companies were granted this new license.

Why just 5 you may ask? Well 15 Million Birr of capital was required with an additional 30 million held in a blocked account.

This is a big step for the watchdog, as foreign currency has always been a sensitive subject, especially when the country is consistently grappling with an FX crisis!

It seems that this business segment is only limited to mainly buying and selling FX, staying away from the traditional ኤል ሲ process where individuals and companies are put on a waiting list to procure those precious Euros and Dollars alike.

These bureaus will definitely alleviate the banks FX strain but for everything that is sold, there’s something bought, and what’s bought is FX at a lower rate. The idea is to buy low, sell high with service charge fees being added on as part of the revenue generating structure.

Who are the sellers? Well banks primarily, especially in the early days. In an ideal world, these bureaus will be hoping that individuals become FX suppliers too, the recent currency float being a big motivator for them to exchange their FX for Birr.

In a nutshell 🥜, the move is aimed at freeing up capital (for importers trying to get goods into the country and boost consumerism) and encourage exports

Talking about foreign currency outside the walls of a bank always felt kind of illegal so getting used to walking into an FX bureau to talk dollars will need a little getting used to.

In hindsight, it seems like the NBE is banking (no pun intended) on the business skills of those that are not involved in financial services to boost the FX trading market.

The fact of the matter is, whether the ‘outsourcing’ on FX collection outside traditional financial institutions can have a positive impact on the overall macro economy is to be seen.

The party has started, let’s see how many party goers remain on the dance floor🕺

Key Takeaway

Walk In, Walk Out?: Acquiring FX has always been very difficult. NBE’s move to allow Independent Forex Bureaus to trade FX seems to shift the culture of financial services being the sole players of the game.